Haryana Mulls Competitive Bidding Route for Power Transmission Projects

The Haryana Electricity Regulatory Commission (HERC) has invited comments and suggestions from power sector stakeholders on its paper proposing the introduction of competitive bidding for power transmission projects.

The deadline for submitting comments and suggestions was September 11, 2020.

The paper also proposed that a benchmark project cost for the development of transmission projects be set. The Commission said that it would be worthwhile to consider competitive bidding options, including public-private partnership (PPP) models, to help optimize investments in the transmission system infrastructure in the state. This would be a first in the country, it added.

It cited provisions from the National Electricity Policy, which allowed for special mechanisms to encourage private investment in the transmission sector. These provisions also said that the role of the private sector in generation, transmission, and distribution would become increasingly critical due to the growing need for investment in the industry.

Currently, transmission projects in the state are being implemented by state departments or on an EPC basis, primarily on the CAPEX model. Under the CAPEX model, the consumer has to bear all the capital expenditure involved in the project, and this is recovered through transmission tariffs, and state load despatch center (SLDC) charges.

The Commission pointed out that there have been physical and financial slippages in the implementation of transmission projects due to delays and shortage of funds from lending agencies. Procedural delays in acquiring approvals and clearances from the board, as well as the state government, have also slowed these projects down.

It added that delays on the part of vendors, the quality of output, cost over-runs, and issues of conflict of interest have also weighed on transmission projects. Separately, the increasing size of these projects has also put a strain on the resources available to transmission licensees or state transmission utilities (STU), it added.

The HERC said that the introduction of competitive bidding for these projects under the PPP route would play a significant role in mitigating these concerns by not only more investments, but also their operational and managerial efficiency.

The Commission also presented data from the Haryana Vidyut Prasaran Nigam Limited (HVPNL), which showed that the competitive bidding route had yielded a reduction in costs ranging from 20% to 57%.

It added that these projects are more transparent, less burdensome on the state government, and help attract private capital and the latest technology in the sector while mitigating investment risks for STUs.

It also presented systems and mechanisms adopted by various state electricity regulatory commissions (SERCs) in the past to determine benchmark costs. These SERCs included the Bihar Electricity Regulatory Commission (BERC), the Maharashtra Electricity Regulatory Commission (MERC), Uttarakhand Electricity Regulatory Commission (UERC), and the Punjab State Electricity Regulatory Commission (PSERC).

In a previous order, the BERC had suggested a threshold limit of ₹1 billion (~$13.4 million) above which all new projects and augmentation of interstate projects were to be developed through tariff-based competitive bidding. The PSERC had suggested a threshold of ₹500 million (~$6.7 million). Meanwhile, the MERC and UERC said that they would consider specifying a threshold limit for these kinds of projects.

Recently, Mercom wrote about how transmission woes, the high cost of farmland, and lack of support from the distribution companies have derailed the growth of the solar in Haryana.